We understand how frustrating it can be to search for a home in Austin. Half the battle is learning the key terms and what they mean in regards to Texas real estate. So each week we bring you Key Term Tuesday – our way of helping you decode the industry jargon that keeps you from owning your home search. This week we’ll answer what is earnest money?
What Is Earnest Money?
When an offer is accepted, a buyer deposits earnest money with the title company to demonstrate good faith and confirm their intention to buy a property. The title company holds the funds while the contract is in place. If the transaction closes, earnest money is credited towards the purchase price, so you can think of it as a pre-paid portion of your down payment. The earnest money typically ranges between $500 and 1% of the purchase price, but is negotiable.
In contracts that use the Texas termination option, the earnest money is fully refunded if the buyer cancels the contract within the option period. If the buyer cancels after the option period and outside the other cancellation contingencies, the earnest money is typically kept by the seller.
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